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Private Label limits flexibility

Private Label&#39s freepay flexible mortgage is aimed at borrowers who want to make limited overpayments but do net get around to it.

This discounted rate base rate tracker is available for loans of up to 95 per cent of valuation. It remains at 0.74 per cent above the Bank of England base rate for the first five years, giving a current payable rate of 5.99 per cent. It then reverts to 1 per cent above the base rate for the remaining mortgage term.

The structure of freepay differs from other flexible mortgages in that the lender makes monthly overpayments of 0.25 per cent of the loan each year for the first five years. In effect, this means that borrowers are paying 0.49 per cent above the base rate for the first five years. Borrowers can also overpay up to 10 per cent of the loan each year themselves without incurring an early redemption penalty.

If they overpay by more than this amount, they must pay 2 per cent of the loan in years one and five, 3 per cent in years two and four and 4 per cent in year three as a penalty.

According to Moneyfacts on July 17, 2001, freepay is the only mortgage of this type. The Woolwich open plan offset mortgage, which remains at 0.75 per cent above the base rate, is more flexible than freepay as underpayments, overpayments and payment holidays are allowed. However it has a higher payable rate, currently 6 per cent, compared to freepay.

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